FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

(Mark One)

For the quarterly period ended September 30, 2004

OR

For the transition period from __________ to __________

Commission file number 001-14905

BERKSHIRE HATHAWAY INC.

1440 Kiewit Plaza, Omaha, Nebraska 68131

(402) 346-1400

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES x NO o

     Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES x NO o

     Number of shares of common stock outstanding as of October 22, 2004:

BERKSHIRE HATHAWAY INC.

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Part I Financial Information

BERKSHIRE HATHAWAY INC.
and Subsidiaries

See accompanying Notes to Interim Consolidated Financial Statements

2

BERKSHIRE HATHAWAY INC.
and Subsidiaries

*

Average shares outstanding include average Class A common shares and average Class B common shares determined on an equivalent Class A common stock basis. Net earnings per share shown above represents net earnings per equivalent Class A common share. Net earnings per Class B common share is equal to one-thirtieth (1/30) of such amount.

See accompanying Notes to Interim Consolidated Financial Statements

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BERKSHIRE HATHAWAY INC.
and Subsidiaries

See accompanying Notes to Interim Consolidated Financial Statements

4

BERKSHIRE HATHAWAY INC.
and Subsidiaries

Note 1. General

     The accompanying unaudited Consolidated Financial Statements include the accounts of Berkshire Hathaway Inc. (“Berkshire” or “Company”) consolidated with the accounts of all its subsidiaries and affiliates in which Berkshire holds a controlling financial interest as of the financial statement date. As of January 1, 2004, Berkshire adopted FASB revised Interpretation No. 46 “Consolidation of Variable Interest Entities” (“FIN 46”). See Note 1(r) to the December 31, 2003 audited Consolidated Financial Statements for additional information concerning this new accounting pronouncement and Note 12 below for additional information concerning Berkshire’s investment in Value Capital.

     Reference is made to Berkshire’s most recently issued Annual Report on Form 10-K that included information necessary or useful to understanding Berkshire’s businesses and financial statement presentations. In particular, Berkshire’s significant accounting policies and practices were presented as Note 1 to the audited Consolidated Financial Statements included in that Report. Certain amounts in 2003 have been reclassified to conform with the current year presentation.

     Financial information in this Report reflects any adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary to a fair statement of results for the interim periods in accordance with generally accepted accounting principles (“GAAP”).

     For a number of reasons, Berkshire’s results for interim periods are not normally indicative of results to be expected for the year. The timing and magnitude of catastrophe losses incurred by insurance subsidiaries and the estimation error inherent to the process of determining liabilities for unpaid losses of insurance subsidiaries can be relatively more significant to results of interim periods than to results for a full year. Investment gains/losses are recorded when investments are sold, other-than-temporarily impaired or in certain instances, as required by GAAP, when investments are marked-to-market. Variations in the amounts and timing of investment gains/losses can cause significant variations in periodic net earnings.

Note 2. Significant business acquisitions

     Berkshire’s long-held acquisition strategy is to purchase businesses with consistent earning power, good returns on equity, able and honest management and at sensible prices. Businesses with these characteristics typically have market values that exceed net asset value, thus producing goodwill for accounting purposes.

     On May 23, 2003, Berkshire acquired McLane Company, Inc. (“McLane”), from Wal-Mart Stores, Inc. for cash consideration of approximately $1.5 billion. McLane is one of the nation’s largest wholesale distributors of groceries and nonfood items to convenience stores, wholesale clubs, mass merchandisers, quick service restaurants, theaters and others.

     On August 7, 2003, Berkshire acquired all the outstanding common stock of Clayton Homes, Inc. (“Clayton”) for cash consideration of approximately $1.7 billion in the aggregate. Clayton is a vertically integrated manufactured housing company that manufactures homes, which are sold through a system of company owned stores and independent retailers. Clayton also operates manufactured housing communities and provides mortgage loans and services and insurance protection to customers.

     The results of operations for each of the entities acquired are included in Berkshire’s consolidated results of operations from the effective date of each acquisition. The following table sets forth certain unaudited consolidated earnings data for the first nine months of 2003, as if each of the acquisitions discussed above were consummated on the same terms at the beginning of the year. Dollars are in millions, except per share amount.

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Notes To Interim Consolidated Financial Statements (Continued)

Note 3. Investments in MidAmerican Energy Holdings Company

     On March 14, 2000, Berkshire acquired 900,942 shares of common stock and 34,563,395 shares of convertible preferred stock of MidAmerican Energy Holdings Company (“MidAmerican”), a U.S. based global energy company, for $35.05 per share, or approximately $1.24 billion in the aggregate. During March 2002, Berkshire acquired 6,700,000 additional shares of the convertible preferred stock for $402 million. Such investments currently give Berkshire about a 9.9% voting interest and an 83.7% economic interest in the equity of MidAmerican (80.5% on a diluted basis). As of September 30, 2004, Berkshire and certain of its subsidiaries also owned $1,478 million of 11% non-transferable trust preferred securities. Mr. Walter Scott, Jr., a member of Berkshire’s Board of Directors, controls approximately 88% of the voting interest in MidAmerican. The convertible preferred stock is, in substance, a substantially identical subordinate interest to a share of common stock and economically equivalent to common stock. Therefore, Berkshire accounts for its investments in MidAmerican pursuant to the equity method. Reference is made to the Notes to the Consolidated Financial Statements included in Berkshire’s Annual Report on Form 10-K for the year ending December 31, 2003 for additional information concerning terms of the convertible preferred stock. Berkshire’s equity in earnings from MidAmerican includes Berkshire’s proportionate share (83.7% in 2004) of MidAmerican’s undistributed net earnings reduced by deferred taxes on such undistributed earnings in accordance with SFAS 109, reflecting Berkshire’s expectation that such deferred taxes will be payable as a consequence of dividends from MidAmerican. However, no dividends from MidAmerican are likely for some time. It is possible that when, and if, a dividend is paid MidAmerican will then be eligible for inclusion in Berkshire’s consolidated tax return and a tax on the dividend would not be due. Berkshire’s share of interest expense (after-tax) on its investments in MidAmerican’s trust preferred securities (debt) has been eliminated.

     Condensed consolidated balance sheets of MidAmerican are as follows (in millions).

     Condensed consolidated statements of earnings of MidAmerican for the third quarter and first nine months of 2004 and 2003 are as follows (in millions).

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Notes To Interim Consolidated Financial Statements (Continued)

Note 3. Investments in MidAmerican Energy Holdings Company (Continued)

     MidAmerican, through its subsidiaries, owns the rights to proprietary processes for the extraction of zinc, manganese, silica, and other elements in the geothermal brine and fluids utilized in energy production at certain geothermal energy generation facilities. Mineral extraction facilities have been installed near the energy generation sites (“the Project”). For the past several months, MidAmerican’s management had been assessing the long-term economic viability of the Project in light of current cash flow and operating losses and continuing efforts to increase production. MidAmerican’s management evaluated estimates of projected cash flows for the Project during the third quarter of 2004, including the expected impact of planned improvements to the mineral extraction processes and also began exploring other operating alternatives, such as establishing strategic partnerships.

     On September 10, 2004, MidAmerican’s management decided to cease operations of the Project, effective immediately. Consequently, it was concluded that a non-cash impairment charge of approximately $340 million, after tax, was required to write-off the Project, rights to quantities of extractable minerals, and allocated goodwill to estimated net realizable value. MidAmerican incurred net after-tax losses attributed to the Project of $27 million and $19 million for the nine-month period ended September 30, 2004 and 2003, respectively. In connection with ceasing operations, MidAmerican expects to make cash expenditures of approximately $13 million related to the disposal activities, a portion of which will be offset by proceeds from asset sales. MidAmerican also expects to receive approximately $55 million in future tax benefits. Berkshire’s share of the non-cash impairment charge was $255 million after tax, and is included in equity in earnings of MidAmerican Energy Holdings Company.

Note 4. Investments in fixed maturity securities

     Data with respect to investments in fixed maturity securities, which are classified as available-for-sale, are shown in the tabulation below (in millions).

Note 5. Investments in equity securities

     Data with respect to investments in equity securities are shown in the tabulation below (in millions).

7

Notes To Interim Consolidated Financial Statements (Continued)

Note 6. Loans and Receivables

     Receivables of insurance and other businesses are comprised of the following (in millions).

     Loans and finance receivables of finance and financial products businesses are comprised of the following (in millions).

     Loans and finance receivables are not held for sale and are stated at amortized cost less allowances for uncollectible accounts. Berkshire has the ability and intent to hold such loans and receivables to maturity. Amortized cost represents acquisition cost, plus or minus origination and commitment costs paid or fees received which together with acquisition premiums or discounts are required to be deferred and amortized as yield adjustments over the life of the loan. Allowances for uncollectible accounts were immaterial as of September 30, 2004 and December 31, 2003.

Note 7. Deferred income tax liabilities

     The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are shown below (in millions).

Note 8. Notes payable and other borrowings

     Notes payable and other borrowings of Berkshire and its subsidiaries are summarized below (in millions).

8

Notes To Interim Consolidated Financial Statements (Continued)

Note 8. Notes payable and other borrowings (Continued)

Note 9. Common stock

     The following table summarizes Berkshire’s common stock activity during the first nine months of 2004.

     Each share of Class A common stock is convertible, at the option of the holder, into thirty shares of Class B common stock. Class B common stock is not convertible into Class A common stock. Class B common stock has economic rights equal to one-thirtieth (1/30) of the economic rights of Class A common stock. Accordingly, on an equivalent Class A common stock basis, there are 1,537,985 shares outstanding at September 30, 2004 and 1,536,630 shares outstanding at December 31, 2003. Each Class A common share is entitled to one vote per share. Each Class B common share possesses the voting rights of one-two-hundredth (1/200) of the voting rights of a Class A share. Class A and Class B common shares vote together as a single class.

Note 10. Comprehensive income

     Berkshire’s comprehensive income for the third quarter and first nine months of 2004 and 2003 is shown in the table below (in millions).

9

Notes To Interim Consolidated Financial Statements (Continued)

Note 11. Pension plans

     The components of net periodic pension expense for the third quarter and first nine months of 2004 and 2003 are as follows (in millions).

     Expected contributions to defined benefit plans in 2004 are not expected to differ significantly from amounts previously disclosed. During the third quarter of 2004 a Berkshire subsidiary amended its defined benefit plan to freeze benefits as of the end of 2005. Such an event is considered a curtailment and the curtailment gain included in the table above represents the elimination of projected plan benefits beyond the end of 2005 and the recognition of unamortized prior service costs and actuarial losses as of the amendment date.

Note 12. Value Capital

     Value Capital L.P., (“Value Capital”), a limited partnership, commenced operations in 1998. A wholly owned Berkshire subsidiary is a limited partner in Value Capital. The partnership’s objective is to achieve income and capital growth from investments and arbitrage in fixed income investments. Profits and losses (after fees to the general partner) are allocated to the partners based upon each partner’s investment. As a limited partner Berkshire’s exposure to loss is limited to the carrying value of its investment. Berkshire does not guarantee any of Value Capital’s liabilities and has no control over decisions made by the management of Value Capital or those of its general partner.

     Prior to January 1, 2004, Berkshire accounted for its investment in Value Capital pursuant to the equity method. Effective January 1, 2004 and through June 30, 2004 Berkshire consolidated Value Capital as a result of the adoption of FIN 46 because during that period Value Capital was deemed to be a variable interest entity (“VIE”) and Berkshire was the primary beneficiary. As permitted under FIN 46 as revised, Berkshire elected not to restate prior year financial statements.

     During the three months ending September 30, 2004, Value Capital accepted investments from new limited partners unrelated to Berkshire totaling $162 million. As a result, Berkshire’s economic interest in Value Capital declined from approximately 90% at June 30, 2004 to approximately 73% as of September 30, 2004. In addition as permitted under the partnership agreement, Berkshire notified Value Capital of its intention to redeem $100 million of its investment at the end of 2004, which together with additional third party investments made after September 30, 2004 should further reduce Berkshire’s interest to not more than 65% as of December 31, 2004. Consequently, Berkshire reevaluated its investment in Value Capital under FIN 46 and concluded that Value Capital is no longer a VIE. Since Berkshire possesses no voting or similar rights or other rights that could otherwise represent a controlling financial interest, Berkshire ceased consolidation of Value Capital as of July 1, 2004 and resumed accounting for the investment under the equity method. The investment in Value Capital ($637 million as of September 30, 2004 and $634 million as of December 31, 2003) is included in other assets of finance and financial products businesses in the Consolidated Balance Sheets. Summarized financial information of Value Capital follows (in millions).

10

Notes To Interim Consolidated Financial Statements (Continued)

Note 13. Business segment data

     A disaggregation of Berkshire’s consolidated data for the third quarter and first nine months of each of the two most recent years is as follows (in millions).

*

Amounts of interest expense represent interest on notes payable and other borrowings exclusive of that of finance businesses and interest allocated to certain businesses.

11

FORM 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

     Net earnings for the third quarter and first nine months of 2004 and 2003 are disaggregated in the table that follows. Amounts are after deducting minority interests and income taxes. Dollar amounts are in millions.

      Insurance — Underwriting

     Berkshire engages in both primary insurance and reinsurance of property and casualty risks. Through General Re, Berkshire also reinsures life and health risks. In primary insurance activities, Berkshire subsidiaries assume defined portions of the risks of loss from persons or organizations that are directly subject to the risks. In reinsurance activities, Berkshire subsidiaries assume defined portions of similar or dissimilar risks that other insurers or reinsurers have subjected themselves to in their own insuring activities. Berkshire’s principal insurance businesses are: (1) GEICO, (2) General Re, (3) Berkshire Hathaway Reinsurance Group (“BHRG”) and (4) Berkshire Hathaway Primary Group. Berkshire’s management views insurance businesses as possessing two distinct operations—underwriting and investing. Accordingly, Berkshire evaluates the performance of underwriting operations without allocation of investment income.

     A summary follows of underwriting results from Berkshire’s insurance businesses for the third quarter and first nine months of 2004 and 2003. Dollar amounts are in millions.

     The pre-tax underwriting results for the third quarter and first nine months of 2004 include losses of $1.25 billion from the four hurricanes that struck the southeast United States and the Caribbean in the third quarter. These losses are reflected in the underwriting results of BHRG (about $945 million), General Re (about $255 million) and GEICO (about $55 million).

     GEICO

     GEICO Corporation through its affiliates (“GEICO”) provides private passenger auto insurance to customers in 49 states and the District of Columbia. GEICO policies are marketed mainly through direct response methods, in which insureds apply directly to the company for insurance coverage over the telephone, through the mail or via the Internet. This is a significant element in GEICO’s strategy to be a low cost insurer. In addition, GEICO strives to provide excellent service to customers with the goal of establishing long-term customer relationships.

     GEICO’s pre-tax underwriting results for the third quarter and first nine months of 2004 and 2003 are summarized in the table below. Dollar amounts are in millions.

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FORM 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

     GEICO (Continued)

     Premiums earned in the third quarter of 2004 were $2,262 million, an increase of 13.3% over the third quarter of 2003. For the nine months ended September 30, 2004 earned premiums were $6,550 million, an increase of 14.5% over 2003. The growth in premiums earned for voluntary auto was 14.2% and reflects an 11.0% increase in policies-in-force during the past year and modest average premium rate increases.

     Over the twelve months ending September 30, 2004, policies-in-force increased 7.8% in the preferred risk auto line and increased 21.7% in the standard and nonstandard auto lines. Voluntary auto new business sales in the first nine months of 2004 increased 12.9% as compared to 2003. Voluntary auto policies-in-force at September 30, 2004 were 472 thousand higher than at December 31, 2003. Management attributes the growth of in-force policies to competitive rates, increased advertising and dedication to customer service. During the third quarter of 2004, GEICO began selling auto insurance in New Jersey, which will contribute to future policies-in-force growth.

     Losses and loss expenses increased 8.0% to $1,652 million in the third quarter of 2004 and 7.7% to $4,744 million for the first nine months of 2004. The loss ratio was 72.4% in the first nine months of 2004 compared to 77.0% in 2003. Overall, the number of claims to loss exposure units (“claim frequency”) declined in 2004 as compared to 2003. Claims frequencies for physical damage coverages have decreased in the three to six percent range from 2003, while frequencies for bodily injury coverages have decreased in the four to six percent range. Average severity (or the estimated cost per claim) for bodily injury claims has increased in the five to seven percent range over 2003 while physical damage severity has increased in the three to five percent range. Catastrophe losses for the first nine months of 2004 totaled approximately $73 million compared to $53 million in 2003. The losses in 2004 were primarily from the hurricanes in the third quarter.

     Policy acquisition expenses, which represent approximately 55% of total underwriting expenses, increased 17.4% in the first nine months of 2004 to $633 million, primarily due to increased advertising costs. Other underwriting expenses for the first nine months of 2004 of $495 million increased about 3% over 2003, primarily due to higher salary and other employee benefit expenses, including profit sharing accruals.

     General Re

     General Re conducts a reinsurance business, which offers reinsurance coverage of essentially all types of property, casualty, life and health risks in the United States and worldwide. General Re’s principal reinsurance operations are internally comprised of: (1) North American property/casualty, (2) international property/casualty, which principally consists of business written through 91%-owned Cologne Re, (3) London-market property/casualty through the Faraday operations, and (4) global life/health.

     General Re’s pre-tax underwriting results for the third quarter and first nine months of 2004 and 2003 are summarized below. Dollars are in millions.